UPDATE 1-Watson to buy Actavis for at least 4.25 bln euros

April 25, 2012|Reuters

April 25 (Reuters) - Watson Pharmaceuticals Inc saidon Wednesday it agreed to buy Actavis Group for at least 4.25billion euros ($5.60 billion), in a deal that cements its statusas one of the world's biggest suppliers of generic drugs.

Reuters first reported on March 21 that U.S.-based Watsonwas close to buying the Swiss drugmaker to help it compete moreeffectively against rivals Teva Pharmaceutical Industries and the Novartis unit Sandoz.

The generics sector has seen a wave of mergers in recentyears as Western governments pressure the industry to providedrugs at the lowest possible price, favoring large players whocan produce at the lowest cost.

The deal is important also to Deutsche Bank,which was left holding billions of euros of Actavis debt after aleveraged buyout in 2007 by Icelandic tycoon Bjorgolfur ThorBjorgolfsson.

It comes a day before Deutsche Bank posts first-quarterearnings. Selling down its stake in Actavis will allow Germany'slargest lender to free up a capital buffer that it wouldotherwise need to set aside to meet tougher bank safety rules.

Under the terms of the agreement, Watson will make anupfront payment of 4.25 billion euros. Actavis stakeholders alsocould receive a payment valued at 250 million euros duringnegotiations should Actavis achieve certain 2012 performancetargets, the company said.

Watson said the deal would immediately add to earnings andestimated annual cost savings and other synergies of more than$300 million within three years.

The acquisition is Chief Executive Officer Paul Bisaro'sbiggest splash since he took over at Watson in 2007 after 15years at rival generic drugmaker Barr Pharmaceuticals. The CEOhas been telling Wall Street he was interested in acquisitionsto boost the generics business or its branded-drugs unit thatspecializes in women's health and urology.